FSA Reimbursement Before Payment

[Guest loricraun]

In regard to an administrator’s payment of funds from an individual’s FSA account, is the payment triggered by the occurrence of the eligible expense or by the participant's payment of the eligible expense?

Scenario:

A participant incurs eligible hospital charges of $1,000 within the plan year. A third party insurance contract pays $800, and the hospital bills the patient for the remaining $200 (as evidenced on the hospital invoice or EOB).

Does the participant actually have to pay the $200 first before he can receive the reimbursement payment or can he be reimbursed prior to his actual out of pocket payment?

I’ve heard conflicting statements on this issue and would appreciate other opinions.

Thanks,

Lori Craun

[Guest MSMA]

All we look for in this situation: third party documentation (EOB etc) that demonstrates that insurance has paid it's portion and that the balance is now due by the patient. In cases such as dentistry, when benefits have been maxxed out, we require documentation showing that...NOT just the participant's indication that, "well, I knew I already maxxed it out, so I did not bother submitting it..."

[Lisa Hand]

Prop. Treas. Reg 1.125-2, Q/A-7(5), states, "A health FSA may reimburse a medical expense only if the participant provides a written statement from an independent third party stating that the medical expense has been incurred and the amount of such expense and the participant provide a written statement that the medical expense has not been reimbursed or is not reimbursable under, any other health plan coverage." And Prop. Treas. Reg 1.125-2, Q/A-7 (6), "Expenses are treated as having been incurred when the participant is provided with the medical care that gives rise to the medical expenses, and not when the participant is formally billed or charged for, or pays for the medical care."

There is no requirement in the regulations for payment prior to reimbursement, so unless your plan documents state otherwise, it would seem, that the expense should be reimbursed once incurred and properly requested and documented by the participant

[mroberts]

One of the things that you should always look for is quick reimbursement from your FSA provider. Therefore, your employees will not have to come out of pocket for any expenses and have to wait until the plan reimburses them. A lot of companies actually have it set up so that the funds are automatically taken out of the FSA to cover any incurred expenses so that the employee doesn't get a bill at all.

In answer to your question, no the employee does not have to pay the amount first.

[Guest Carma Christensen]

So here's a question. How does this apply to orthodontics, where the initial expense is defined at the first of the treatment, but the treatment itself goes over a period of time. The dental insurance pays on a monthly basis up to its limit.

Just to complicate things, what happens if you lose dental insurance coverage in the middle of orthodontia treatment and and thus re-allocate the proportion of the treatment you are personally responsible for vs. that paid by insurance? How can you document the charges so they can be paid by your FSA?

I appreciate the wisdom of those more experienced members!

Carma Christensen, Business Manager

MarCon, Inc.

[papogi]

Check out these recent comments by Harry Beker concerning up-front reimbursement of orthodontic charges:

http://www.ebia.com/weekly/articles/2001/C...HarryBeker.html

Most FSA plans provide that the employee is reimbursed only as monthly payments are made. Obviously, there seems to be some room for interpretation, as long as your judgement is applied uniformly.

If a participant has no dental coverage, or has reached the lifetime maximum for ortho, your life will be easier. As long as any dental insurance is possible, I would only reimburse based on EOB's which show the employee's portion. Once the lifetime maximum is reached, the employee should not need to submit copies of EOB's any longer.

Post again if I am missing your question.

[Guest Carma Christensen]

Thanks. Makes good sense to me.